Indian Income Tax Issues - tdsonrentpaidbyindividualorhuf

Since when applicable: Section 194-IB was inserted by the Finance Act, 2017 with effect from 1.6.2017.

Objective: To provide for tax deduction at source from rent payable by individual/HUF in certain cases. Such individual/HUF shall not be a person covered by section 194-I (individual/HUF having turnover exceeding the limit specified by section 44AB).

Meaning of Rent: Rent means any payment, by whatever name called, under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of any land or building or both.

Person	Liability to deduct TDS under section 194-IB
Individual/HUF having income under any head other than business or profession	Covered under section 194-IB.
Individual/HUF carrying business/profession but turnover does not exceed the limits specified under section 44AB	Covered under section 194-IB
Individual/HUF carrying business/profession and turnover is more than the limits specified under section 44AB (liable for tax audit)	Not covered under section 194-IB. However, covered under section 194-I. But only Land and Building are covered under section 194-IB whereas land, building, plant, machinery or equipment are covered under section 194-I.

Limit for deduction of tax at source: Payment of rent exceeding Rs.50,000 per month attracts deduction of tax at source.

When to make deduction of tax at source: When such individual/HUF is responsible for paying rent to any resident at the time of credit or payment of the rent of last month of the previous year, or last month of the tenancy, whichever is earlier.

Hence, it is clear that the deduction of tax at source is to be made only once in a financial year, for the whole rent paid during the financial year if it exceeds Rs.50,000 per month.

Rate of TDS: Tax is to be deducted @5% of the rent paid/credited (3.75% from 14.05.2020 to 31.03.2021)

No need to obtain Tax Deduction Account Number (TAN): The person responsible for deduction of tax under this section need not to obtain TAN.

Particulars	194-I	194-IB
Payments covered	Rent for use of land or building including factory building or land appurtenant to a building including factory building. Rent for use of any machinery or plant or equipment.	Rent for use of land or building or both
Person liable to deduct	Any person paying rent to a resident. In case of individual/HUF, the turnover is to be more than the limit specified under section 44AB	Individual/HUF responsible for paying rent to a resident.
Percentage of tax to be deducted at source	2% of rent on machinery, plant or equipment. 10% of rent on land, building.	5% of rent payable on use of land, building
Basic Exemption Limit	Rs.1,80,000	Up to Rs.50,000 per month.
Periodicity of tax deduction	Monthly	Once in a financial year for a single payee.
Liability of deduction of tax for rent paid for personal purposes	No need to deduct tax if individual or HUF pays rent for personal purposes, i.e., rent paid for business purpose by individual/HUF is liable for TDS.	Liability to deduct tax even if the rent is paid for personal purpose of individual/HUF. So, even where the individual/HUF is residing in the house, the liability of TDS arises if rent paid is more than Rs.50,000.
TDS liability by type of income of deductor	Business/Professional income	Salaried employees also liable to deduct TDS. Assessees having any source of income are liable to deduct tax. However, in case of business/profession, the turnover to be less than the limit under section 44AB.